Hawthorne Collective Inc, a subsidiary of Scotts Miracle-Gro, is suing an investment management company, claiming it tried to “ruin” Hawthorne’s $175 million interest in a cannabis industry acquisition firm.
In a lawsuit, Hawthorne and a related entity accused JW Asset Management LLC and cannabis operator TerrAscend Corp of attempting to dominate the board of directors of RIV Capital Inc. According to the lawsuit, JW Asset Management, which controls TerrAscend and is the largest shareholder in RIV Capital, has tried to oust three RIV directors nominated by Hawthorne and replace them with their own chosen members, which Hawthorne claims violates antitrust laws.
“Defendants’ attacks on, and attempts to take control of, RIV Capital violate federal antitrust law,” a lawyer for Hawthorne, Peter Safirstein, wrote in the complaint in the Southern District of New York federal court.
Last year, RIV Capital, with a multimillion-dollar investment from Hawthorne, acquired New York licensed cannabis cultivation and retail company Etain LLC for $247 million, a company TerrAscend had also intended to buy. In the lawsuit, Hawthorne claims “series of anticompetitive or otherwise wrongful and improper actions” were undertaken “to stop RIV Capital’s entry into the New York-New Jersey market.” New York’s vertically integrated registered organizations, such as Etain, aren’t allowed to partake in the state’s adult-use cannabis market util nonprofit and social equity dispensaries open first. The lawsuit claims that stopping RIV’s entry into the New York market would reduce industry competition, to the benefit of TerrAscend.
TerrAscend won one of New Jersey’s vertically integrated medical cannabis licenses in 2018 and was one of the former medical cannabis-only operators that moved into adult-use sales in New Jersey in April 2022. TerrAscend also owns interests in major brands including The Apothecarium and Gage Growth Corp. TerrAscend also owns three Cookies-branded stores in Michigan as well as Toronto. TerrAscend has “exclusive” rights to the Cookies brand in New Jersey.
Scotts Miracle-Gro has become a leading supplier of equipment used in the process of growing cannabis since it initially entered the cannabis industry with its 2015 acquisition of General Hydroponics Inc. and Bio-Organic Solutions Inc. and launched its subsidiary The Hawthorne Collective to focus on strategic minority investments in various areas of the cannabis industry. The company said the addition of Hawthorne Collective allowed it to explore and pursue opportunities not currently pursued by The Hawthorne Gardening Company, its hydroponic, lighting and nutrient supply arm focused on supplying the cannabis industry.
“The addition of The Hawthorne Collective into our portfolio allows us to explore and pursue new opportunities in an industry that is poised for significant growth in the years ahead,” said Jim Hagedorn, chairman and CEO of Scotts Miracle-Gro. “With full appreciation of current banking and legal requirements, The Collective is designed to allow us to eventually participate directly in a larger marketplace as the legal environment changes over time.”
The company’s executives have stepped up efforts to support federal legalization and have advocated for changes that would lift baking restrictions on cannabis dispensaries. Advocates for federal legalization have said executives at big companies can help legitimize the issue in the eyes of lawmakers.
“It’s our belief, and this is not a grand revelation by any stretch: Federal legalization is obviously going to happen; the question is when and how,” said Chris Hagedorn, executive vice president of Scotts and division president of Hawthorne. “When it does, what are the most valuable assets going to be in a post-legalization world? I think anybody who thinks about it for a while says consumer-facing brands [that make and sell cannabis products] will be the most valuable.”
